United States Court of Appeals For the Ninth Circuit

y
No. 16274

IN THE

United States Court of Appeals

FOR THE NINTH CIRCUIT

AUTHORIZED SUPPLY COMPANY OF ARIZONA, a Corporation,
Appellant,
US.

SWIFT & COMPANY, a Corporation, ARIZONA YORK REFRIGERA-
TION COMPANY, a Corporation, and SOUTHERN ARIZONA YORK
REFRIGERATION COMPANY, a Corporation,

Appellees.

ARIZONA YORK REFRIGERATION COMPANY, a Corporation, and
SOUTHERN ARIZONA YORK REFRIGERATION COMPANY, a
Corporation,

Appellants.
US.

SWIFT & COMPANY, a Corporation,

Appellee.

OPENING BRIEF OF APPELLANT
AUTHORIZED SUPPLY COMPANY.

_

May, Lesner & DEEs, ee eo
706 Arizona Land Title Building,
Tucson, Arizona,

Attorneys for Appellant Authorized ¥eb ©) WY OMe ean
Supply Company.

mal 2-7? 1

Parker & Son, Inc., Law Printers, Los Angeles. Phone MA. 6-9171.

TOPICAL INDEX

PAGE

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TABLE OR AUTHORITIES CITED

CASES PAGE
Artic Engr. Co. v. Wilson, 272 Wis. 129, 74 N. W. 2d 627........ 8
Bennett v. Piscitello, 9 N. YS. 269)... 10

Boviard Mfg. Co. v. Maitland, 92 Ohio St. 210, 110 N. E. 749... 8
California Steel Products Co. v. Wadlow, 58 Ariz. 69, 118 P.

2 SY ise re ese fo essa sco: xdsieas scavach sates eee, 7
Campbell Music Co. v. Singer, 97 A, 2d 340._............ 2. 8
Claybotim Corp. v. Arneo Press, 27 Fed. Supp) 231... 23a 8
Gatch v. Sears, Roebuck & Co., 143 Fed. Supp. 937.000.000.000... 8, 9
Henry v. Rudge, 118 Neb. 260, 224 N. W. 294... 8, 9
Keiney, Guy, 297 So W. 2d 617 222 2a 8
Lone Star Olds Cadillac Co. v. Vinson, 168 S. W. 2d 673........ 8
Moskowitz v. Flock, 112 Pa. 518, 171 Atl. 400... 8
Nickerson v. VWhalenaZ92 Se W. 2d0502...2...2... ie 8
Powers v. Rosenbloom, 143 Me. 361, 62 Atl. 531_.............. 8
Roberts v. J. C. Penney Co., Super. Ct., Maricopa County, Ariz.,

ING. 76505 (1954) a. sce ess, eee etc sat cee ent acenseesenc 12
Simmons v. Brooks, 97 A. 2d 340 .resccccecccceeccececeeeeeeeses 8
Somerton v. International Harvester Co., 56 Ga. App. 655, 193

ee 4/6. Wee eee 8
Stanley Drug Co. v. Smith Laboratories, 313 Pa. 368, 170 Atl.

ARE os cnc Us Buk s nee seen aoe oo dene, Soares ae oe 8
Raber vy. Rauch, 22 F. 2d°@80.. 22. 2a 8, 9
United Engine Co. v. Junius, 196 Iowa 914, 195 N. W. 606........ 8

Willeke v. Neunschwander, 55 Ohio App. 527, 9 N. E. 2d 627 8
Yancey v. Southern Lumber Co., 133 5. C. 369, 131 S. ES2aeaEe

Yancy v. Jeffreys, 39 Ariz. 563, 8 P. 2d 774eesesccesessssssessscsceceecceneees 6
OTHER AUTHORITIES

46 American Jurisprudence (Sales), par: 7Z/........2..00) ee 7

7/ Coupus Juris Secundum (Sales), paryss5.-- 7;

3 Williston on Sales, p. 362 et seq. and 1957 Supp., par. 162... 7

STATUTES PAGE

Arizona Revised Statutes, 1956, Sec. 44-215... escssecessceneeees 5

Arizona Revised Statutes, 1956, Sec. 44-269.............. 5, 6, 10, 11, 12

Arizona Revised Statutes, 1956, Sec. 44-2740... ceececescceeneeeenes 12

40 McKinney’s New York Law (Personal Property), pp. 825-
LENO. nso a5 SELES aE oP oar ree 10

MISCELLANEOUS

New York Legislative Docket 65 (F); 1948 Reports, Recom-

SiO yo SUTMOS IS, AS 0 1 Ta ence eee 9) Reeser eee 11

No. 16274
IN THE

United States Court of Appeals

HOR THY NINTH CERCUIL

AUTHORIZED SUPPLY COMPANY OF ARIZONA, a Corporation,
Appellant,
US.

SWIFT & COMPANY, a Corporation, ARIZONA YORK REFRIGERA-
TION COMPANY, a Corporation, and SOUTHERN ARIZONA YORK
REFRIGERATION COMPANY, a Corporation,

Appellees.

ARIZONA YORK REFRIGERATION COMPANY, a Corporation, and
SOUTHERN ARIZONA YORK REFRIGERATION COMPANY, a
Corporation,

Appellants.
: US.

SWIFT & COMPANY, a Corporation,

Appellee.

OPENING BRIEF OF APPELLANT
AUTHORIZED SUPPLY COMPANY.

Basis of Federal Jurisdiction.

Plaintiff in its complaint against defendant alleged itself
to be a corporation incorporated in Illinois and defendant
to be a corporation incorporated in Arizona. The juris-
diction of the Court was based upon this diversity of
citizenship, and the matter in controversy, exclusive of
interest and costs, exceeded the $3,000 that was prerequi-
site to Federal jurisdiction at the time the complaint was
filed. The jurisdiction of the Court was based upon the
provisions of Title 28, United States Code, Section- 1332.

pa ol
Statement of the Case.

References to the transcript of Record are indicated as
0S eee

In May, 1955, plaintiff contracted with defendant Ari-
zona York Refrigeration Co. to install certain refrigera-
tion equipment in plaintiff's building in Tucson, Arizona.
The installation required, among other things, two refrig-
eration coils. Arizona York Refrigeration Co. suggested
to plaintiff the use of coils made by Bush Manufacturing
Co., a Connecticut corporation [Tr. 152]. Arizona York
Refrigeration Co. ordered the two coils from the Third-
Party Defendant, Authorized Supply Co., the Arizona
distributor for Bush products [Tr. 155], ordering the
units from the description thereof contained in a catalogue
of Bush products which Arizona York Refrigeration Co.
had in its possession [Tr. 156]. The coils were thereupon
shipped to the defendant Arizona York Refrigeration Co.
direct from the Bush factory in Connecticut, and were
billed by the factory to Arizona York Refrigeration Co.
through Authorized Supply Co. The coils were installed
by defendant in plaintiff’s building. Thereafter, in De-
cember, 1955, one of the coils developed a leak which per-
mitted ammonia gas to escape into plaintiff’s storage area,
causing the damage to the meat and other products stored
there by plaintiff that was the basis for this action.

After the leak had been discovered, the defendant Ari-
zona York Refrigeration Co. (or Southern Arizona York
Refrigeration Co., its successor) returned the defective
coil to Bush and received in its place from Bush, a new
coil unit free of charge [Tr. 167, 170 and 180]. That

a oe

replacement unit was thereupon installed in plaintiff’s
warehouse, and plaintiff was credited with the price of
the defective unit (7.e., it received the replacement free).

[Tr. 170, 180].

Thereafter, plaintiff brought its action against Arizona
York Refrigeration Co. and Southern Arizona York Re-
frigeration Co., alleging negligence and breach of warranty
and seeking as damages the value of the products spoiled
by the ammonia gas leaked by the defective unit. The
defendants joined Authorized Supply Company as Third-
Party defendant, alleging negligence and breach of war-
ranty of fitness implied under Arizona law. All negligence
counts were dropped on trial, and both plaintiff and de-
fendants proceeded solely on the theory of breach of

watranty.

At the conclusion of Third-Party Plaintiff’s case, Third-
Party Defendant moved the Court for judgment on the
Third-Party Complaint, on the ground that the evidence
conclusively established that the defendants and Third-
Party Complainants had, in returning the defective coil
and accepting a replacement, made a pre-litigation election
of remedies that foreclosed their right to recover over
against Third-Party Defendant in this action. The motion
was denied. Judgment was entered in favor of plaintiff
on its Complaint, and in favor of defendants on their
Third-Party Complaint against this appellant, Authorized
Supply Co.

This appeal was taken from the Court’s Findings and
fact, Conclusions of Law and judgment against Third-
Party Defendant, Authorized Supply Co. ;

a

Specifications of Error.
ONE.
The trial court erred in making Finding of Fact No. 11,
in that it is on an immaterial matter. The intention of the

parties not to rescind the contract for the purchase of
the defective coil was not a proper issue in this case.

Two.

The trial court erred in drawing Conclusion of Law No.
5, for the reason that the facts found by the court estab-
lished a binding election of remedies as a matter of law.

THREE.

The trial court erred in drawing Conclusion of Law No.
7, for the reason that the Third-Party Plaintiff had bind-
ingly elected its remedy and could have no judgment
against Third-Party Defendant (this appellant) in this
action.

Four.

The trial court erred in denying the Thiry-Party De-
fendant’s Motion for Judgment at the close of Third-Party
Plaintiff’s case, for the same reasons assigned in the fore-
going specifications of error.

Five.

The trial court erred in entering judgment against this
appellant (Third Party-Defendant) on the Third Party
Complaint, for the reasons assigned in Specifications of
Error Nos. One, Two and Three.

=e
ARGUMENT.

This appellant’s position may be briefly summarized
as follows:

The sale by it to appellee and Third-Party plaintiff
Southern Arizona York Refrigeration Company was made
in Arizona and covered by the provisions of the Uniform
Sales Act as enacted in that state. That Act (Arizona
Revised Statutes, Pars. 44-201 et seq.) provides, among
other things, that an implied warranty of “fitness” and/or
“merchantable quality” shall accompany the sale. It sets
out the buyer’s remedies for breach of that warranty
(Par. 44-269). It makes the various remedies exclusive
each of the others and provides that an election of any
shall bar the others. One of those remedies is return of
the goods and restoration of the purchase price. When
Southern Arizona York Refrigeration Company returned
the defective coil to Bush and Co., in Connecticut, and
was provided, free, with a new unit, being credited with
the full amount of the purchace price of the defective unit,
it made a binding election of remedies which, under the
Arizona Statute, precluded its action against Authorized
Supply Company for damages resulting from the breach
of warranty.

The judgment against this appellant arises out of a
breach of implied warranty of fitness of a product sold
by it to appellee Southern York Refrigeration Company.
The implied warranty arises by virtue of Section 44-215
of the Arizona Revised Statutes, 1956. Section 44-269
(Sec. 69 of the Uniform Sales Act) reads, in applicable
part, as follows:

“A. Where there is a breach of warranty by the
seller, the buyer may, at his election:

1. Accept .. . the goods and set up . ... the
breach of warranty by way of recoupment.

a oe

2. Accept or keep the goods and maintain an
action against the seller for damages for breach of
watranty.

2

4. Rescind the contract to sell or the sale and

. 1£ the goods have already been received, return

them or offer to return them to the seller and recover
the price of any part thereof which has been paid.

B. When the buyer has claimed and been granted
a remedy in any one of these ways, no other remedy
can thereafter be granted.”

It is this appellant’s position that appellee Southern Ari-
zona York Refrigeration Company, by returning the de-
fective coil and being credited with its price, had “claimed
and been granted a remedy”, and that “no other remedy
(i.e., by action for damages) can thereafter be granted”.

The remedies provided by Section 44-269 are mutually
exclusive. In Yancy v. Jeffreys (1932), 39 Ariz. 563, 8
P. 2d 774, the Arizona Supreme Court held:

“This transaction presents a purchase and sale.
The general rule of law is that, in case the terms
of the sale are breached by the seller, the buyer has
several remedies among which he may choose. He
may either (a) affirm the sale, notwithstanding the
breach, and carry out his part of the agreement; (b)
rescind the sale, returning the property and recover-
ing anything already paid on the purchase price;
(c) affirm the sale, and, if he has been damaged by
the breach of the contract by the seller, set off the
amount of damage on a suit by the seller for the
balance of the purchase price; or (d) sue the seller
for damages. 55 C. J. 1072, He must, however
elect between these remedies, and is bound by his
election.”

a

The quotation set forth above was set out verbatim in
California Steel Products v. Wadlow (1941), 58 Ariz.
69, 118 P. 2d 67, as being the law of Arizona, the Court
therein further saying:

“The sales statute provides that when a buyer has
claimed and has been granted a remedy in any one
of these ways, no other remedy can thereafter be
granted.”

Williston holds this to be the general rule, and in 3
“Williston on Sales”, p. 362 et seq., lists twenty-four cases
supporting it. In his 1957 supplement to the treatise, the
Section (Par. 162) is still headed “The Buyer’s Remedies
Are Mutually Exclusive’, and eight new cases are added
in support of that conclusion.

When the ‘defective article has been returned to the
seller, and the purchase price repaid by cash, credit, re-
placement or otherwise, there has been a rescission of

the contract as a matter of law.

“Return of the subject matter . . . will deprive the
buyer of any right thereafter to sue for damages.”
46 Am. Jur. “Sales” Par. 727 (citing cases and stat-
ing that the Uniform Sales Act specifically so pro-
vides ).

Pideirom C, J. S.:
“The buyer may not pursue both remedies (under
the Act). Hence, if he has returned the goods
and received back what he paid, he cannot sue for
peeceach of warranty. /7 C. J. S. “Sales” Par. 355,
p. 1263 et seq.

ee
The following is but a partial list of the many cases
which have announced this principle:

Stanley Drug Co. v. Smith Laboratories, 313 Pa.

368, 170 Atl. 274;
Henry v. Rudge, 118 Neb. 260, 224 N. W. 294;

3

Boviard Mfg. Co. v. Mariland, 92 Ohio St. 210,
110 N. E. 749;

Campbell Music Co. v. Singer (D. C. App.), 97
A. 2d 340;

Summons v. Brooks (D. C. App.), 66 Ay 2dia ie

Gatch v. Sears, Roebuck & Co. (U. S. D. C.,,
Sea, 145 Hed) Supp. 037,

Powers v. Rosenbloom, 143 Me. 361, 62 A. 2d 531;

Claybourn Corp. v. Arneo Press (U. S. D. C,,
Ne ll), 27 Bedaesunpecol

Taber v. Rauch (C. CA. 5), 22 F. 2diae

Arctic Engr. Co. v. Wilson, 272 Wis. 129, 74
IND Vy. 2d 627

Willeke v. Neunschwander, 55 Ohio App. 527, 9
N. E. 2d 1018;

Moskowitz v. Flock, 112 Pa. 518, 171 Atl. 400;

Somerton v. International Harvester, 56 Ga. App.

65), 193 SP aao,

United Engine Co. v. Junius, 196 Iowa 914, 195
N. W. 606;

Yancey v. Southern Lumber oa 133 5. Cases)
Vole S 2) 32;

King v. Guy (Mo. App.), 297 S. W. 2d 617;

Lone Star Olds Cadillac Co. v. Vinson (Tex. Civ.
App), 168 S. W. 2d) 673;

Nickerson v. Whalen (Mo. App.), 253 S. W. 2d
502.

92.

In Henry v. Rudge & Guenzel Co., 118 Neb. 260, 224
N. W. 294, the Supreme Court of Nebraska, applying
Section 69 of the Uniform Act to facts similar to those
at bar, said, citing five other Nebraska cases so holding:

“But, assuming there was a warranty, the plain-
tiff’s testimony shows clearly that the sale was re-
scinded. She returned the shoes and was fully repaid
the purchase price and it was done at her request and
voluntarily. Counsel urge that she did not intend
to rescind, and that the statement that she would
see the defendants later about her injuries indicated
that she was not consenting to a rescission. There
is no such thing as a partial rescission, except in
certain cases where the contract is divisible. Where
the sale is for a particular article there can be no
partial rescission. After the return of the shoes and
the repayment to her of the purchase price, the
rescission was complete. In Apex Chemical Co. v.
Compson, 171 NYS 60, the court held that rescis-
sion seems to follow as a matter of law the return
of the property, and that the return itself operates
as a conclusive presumption of law that the plaintiff
intended to rescind. When plaintiff returned the
shoes and received payment for the purchase price,
it was an irrevocable election to rescind, and her
statements to the effect that she would see the defen-
dants later about her injuries was ineffectual to
modify or disaffirm her election to rescind.

“Having rescinded the contract, the plaintiff has
no right of action for damages for breach of the
warranty.”

And in Taber v. Rauch (C. C. A. 5), 22 F. 2d 681,
the court said:

“Taber had a choice of remedies. He could sue for
rescission, or for damages for a breach of warranty;

hi

but he could not take back the consideration, return
the pearls, and maintain a suit for breach of war-
ranty. These remedies are inconsistent, and exclusive
of each other. Wilson v. New United States Cattle
Ranch Co., 73 F. 994; 24 RCL 235; 13 CiSGiae
Williston on Contracts, Par. 1464; Williston on Sales,
ParwGl2.7

In Gatch v. Sears, Roebuck & Co., 143 Fed. Supp. 937,
the court said:

“He (the buyer) cannot pursue both of these reme-
dies, and an election to pursue one is a waiver of the
right to pursue the other. . . . There cannot be a
rescission by the buyer coupled with a recovery for
damages by reason of an alleged breach of contract.”

In addition to the cases cited above, Volume 40 of Mc-
Kinney’s New York Law (Personal Property), at page
825, lists twelve cases in New York alone which, prior
to 1948, supported that proposition.

If further indication of the necessary meaning and effect
of A. R. S. Par. 44-269 were needed, the history of the
Uniform Sales Act in New York would provide it. Prior
to 1948, the New York version of the Uniform Sales Act
read exactly as our present Section 44-269. This same
question of election of remedies came very often before
the courts of that state. The decisions followed the general
rule: That to return the goods is to rescind; to rescind
is to elect the remedy; to elect the remedy is to bar a sub-
sequent suit for damages. See: Bennett v. Prscitello, 9
N. Y. S. 269, and the numerous cases listed in “McKin-
ney’s Personal Property Law”, Vol. 40 of McKinney’s
New York Laws, pp. 825-826. The 1948 New York
Legislature was then called upon to consider changing
what was recognized to be a harsh rule. An amendment
to that Section of the Uniform Act which is our Section

es | |

44-269 was proposed, in which the fourth alternative

remedy (Sec. 44-269(A)4) was amended to read:
eis Kescind the contract . . . or return the goods
and recover the purchase price . . . and damages
recoverable in an action for breach of warranty to
the extent . . . not compensated by recovery of the
purchase price or discharge of the . . . obligation to
pay the same; (emphasis supplied ).”

The committee of the Legislature studying and reporting
on the proposed amendment said of it:
“Its purpose is to enable a buyer who rescinds for
breach of warranty to recover not only the price but
also damages for the breach. . . .”
New York Legislative Docket 65(F); 1948 Re-
ports, Recommendations and Studies.

After passage of the amendment in 1948, cases from that
jurisdiction ceased to be authority in Arizona, which re-
tains the unamended version of the Uniform Sales Act.

It is important to be borne in mind that every one
of the cases cited above was decided under either the exact
statutory language being considered here or under the
rule of the common law, which was the same rule. (See
the annotator’s comment at 157 A. L. R. 1078.) There
can be no substantial question that it is the widespread,
general rule under the Uniform Sales Act that where a
buyer has returned defective merchandise for replacement
or credit, he is foreclosed from suing thereafter for
consequential damages for breach of warranty. Among
only those jurisdictions from which cases have been cited
above, eight, Nebraska, Ohio, the District of Columbia,
Illinois, Wisconsin, Iowa and Alabama, and until 1948,
New York, have adopted this section of the Uniform
Sales Act exactly as it exists in the Arizona Statutes.
The purpose of the Act is to establish uniformity.

eae

“This chapter shall be so interpreted and construed,
as to effectuate its general purpose to make uniform
the laws of those states which enact it.”

1956 Ariz. Rev. Stats., Sec. 44-274.

In the Superior Court case of Roberts v. J. C. Penney
Co., Superior Court of Maricopa County, No. 76505
(1954), the plaintiff purchased a pair of shoes from
defendant. Three or four days later, she noticed a defect
in them. She returned them to defendant, which replaced
them with a new pair. Plaintiff thereafter brought an
action for breach of an implied warranty under the Uni-
form Sales Act, alleging that the defect had caused injury
to her feet. A motion by the defendant for summary
judgment under the then Section 52-578, A. C. A., 1939
(now A. R. S., Sec. 44-269), was granted, the Court’s
written opinion saying:

“Tt is the court’s opinion that . . . a buyer cannot
rescind and at the same time retain his rights to sue
for special damages under the provisions of (The
Act). Whether or not this be a harsh and unjust
rule is for legislative determination and not for judi-
cial determination under the and in contravention of
the plain language of the statute.”

It is submitted that the Arizona statute is unambiguous
and the cases construing that state clear. When the de-
fendant here returned the original coils to Authorized
Supply for credit on new ones, it made a binding and
conclusive election of remedies which bars the action which
by the Third-Party Complaint it now seeks to bring.

Respectfully submitted,
May, LESHER & DEEs,

Attorneys for Appellant Authorized
Supply Company.

APPENDIX.

Page
Exhibit Identified Admitted

Plaintiff’s 1 23, 47 47

2 23, 47 47

3 23, 47 47

4 23, 47 47

5 23, 47 47

6 23, 47 47

7 23, 47 47

8 23, 47 47

9 50 52

10 51 52

11 78 82

12 117 118

Defendant’s A 23, 47 47

B 23, 47 47

C 23, 47 47

D 23, 47 47

E 23, 47 47

F 23, 47 47

G 23, 47, 167 168

H 23, 47 47

I- 23, 47 47

J 23, 47 47

K 23, 47 47

iC 23, 47 47

M 23, 47 47

N 24, 47 47

O 24, 47 47

le 24, 47 47

O 24, 47 47

R 24, 47 47

iS) 26 26

T 176 178

U 176 178

vv 178 178

W 179 182

28 179 182

Y 179 182

Z 182 182

AA 182 184

AB 184 185

AC 184 185

AD 187 187
Third-Party

Defendant’s <A 24, 47 47

B 24, 47 47

C 24, 47 47

D 24, 47 47

E 24, 47 47